From the History of Ethereum to Conceptualizing and Paving The Way to Serenity: The Final Phase of The Merge
Amongst the youngest billionaires stands Vitaly Dmitriyevich (Vitalik) Buterin, a 28 year old Canadian programmer who is best known as the inventor and co-founder of the Ethereum blockchain and Ether ($ETH) cryptocurrency, which was conceived in 2013 but launched in 2015. Although he had become involved with cryptocurrencies early in their establishment. In 2011, Buterin had co-founded Bitcoin Magazine where he was paid 5 $BTC per article which was a mere $4 at that time. Ether is second to Bitcoin when it comes to market cap, which is the total dollar market value of a company’s outstanding shares of stock. At the time of writing Ether’s market cap stands at 210.286B, more than half of Bitcoin’s which is at 389.675B. Through years of growth “The Merge” had been long awaited since Buterin had mentioned Ethereum 2.0 shortly after Ethereum’s inception, which began the journey we are on right now.
Unlike regular fund transfers that require a third party such as banks to approve and verify the transactions from sender to receiver, a blockchain is a decentralized ledger of all transactions across a peer-to-peer network. This technology provides participants the ability to confirm transactions without a need for a central clearing authority. The transactions create the blocks on the blockchain.
As mentioned above Ethereum is a blockchain powered by its native cryptocurrency — ether also known as ETH. This blockchain enables developers and project founders to create new types of ETH-based tokens and NFTs (Non-Fungible Tokens) through the use of smart contracts, which in short is a self-executing contract with terms of agreements solely between the buyer and seller.
Up until September 15th, Ethereum used a consensus protocol called Proof of Work (PoW) to validate the peer-to-peer transactions. The validation process occurred through a scattered network of computers also known as crypto mining. When a transaction was sent through the blockchain, the computers competed and raced to “solve the puzzle” and validate the transaction. The computer that validated the transaction was rewarded with new coins of the currency in which they validated.
The blockchain requires substantial fees at times, especially if there are more transactions going through than the blockchain can handle. Ethereum can only process 15 transactions per second. Called gas fees, when one submits a transaction, they will be charged a range of fees aside from their transaction that determine how quickly the transaction will go through, all depending on the traffic of the blockchain. In other words, the higher the amount of decentralized apps or projects done on the blockchain, the higher the amount of transactions and the higher the gas fees.
When it comes to cryptocurrencies, it is known that to make profit you must sell your assets at a higher cost than you bought it at. Despite the fact, staking is another way of making profits but in this case you don’t sell your assets. In other words it’s a strategy to earn passive income. Staking is when you lock up your assets in a way to support a blockchain network and earn rewards.
Unlike PoW which requires a network of computers to validate each transaction into the blockchain, the Proof of Stake (PoS) model allows owners of a cryptocurrency to stake their coins which then creates their own validator nodes. As for validators of Ethereum PoS, the ether investors must stake at least 32 ETH in order to be a part of the liquidity pool of validators. All of the validators (participants) combined are in a lottery, whenever a transaction needs a verification, a participant will be chosen from the lottery and win the rewards. The more you have staked the more chances you have at being chosen to become the transaction validator.
Proof of work brings entrepreneurs and companies billions of dollars due to the way transactions are validated, through computing systems and running a software that solves these complexe puzzles. Although it brings a lot of money, it also comes with its drastic environmental burden. The energy consumed through crypto mining in one year is equivalent to the annual emissions of entire countries.
Proof of stake will diminish the blockchain’s energy usage by 99 percent, the use of computers won’t be needed any longer to validate the transactions. This is amazing for the environment, but entrepreneurs and companies of multibillion-dollar crypto mining businesses are worried about how their business gains will drastically change after Ethereum switches out of Proof of Work.
A testnet is crucial in successfully releasing new networks. As for blockchain technology, it is a very important tool in developing new technology. Testnets are used to experiment without risk to real funds, they help developers keep a close eye out for errors, as well as used to receive constructive feedback prior to releasing it to the mainnet. In other words, “the purpose of a testnet is to test a network” Andrew Levine neatly mentioned in CoinTelegraph.
Launched in december 2020, The Beacon Chain is a consensus layer that will introduce proof of stake to Ethereum while replacing the proof of work consensus protocol. Before September 15th, it lived as a separate chain from the mainnet since its genesis but after three triumphant testnet merges, Ethereum mainnet and the Beacon Chain were set to finally merge into one.
Ropsten, Sepolia and Goerli are all Proof of Work testnets that mimic the Ethereum Mainnet. While Ropsten is the testnet to best replicate Ethereum, it was also the first to successfully merge with the beacon chain from PoW to PoS on June 8th 2022. Sepolia followed with another victorious merge on July 6th. At last, the much anticipated final trial ‘Goerli’ was concluded and fully merged without any conflict on August 11th, tying the bow of the testnet trilogy. Paving the way to the Ethereum mainnet merge and leaving the community with increased confidence that there would be no more delays to the long awaited main event.
The Final Phase had been impatiently waited upon and has now arrived. The part of the network that hosts the decentralized apps (dapps), the virtual machine of Ethereum, was updated on September 7th, 2022. The update is named Bellatrix and marks a very important day for The Merge that successfully took effect a little over a week later, on September 15th.
Ethereum has now swapped from miners to validators by upgrading to Proof of Stake, the first block of transactions was finalized with almost 100% client participation. From getting in the way of efforts to mitigating climate change, to reducing energy use by 99%, Ethereum has finally prevailed.